In the context of a $700-billion annual trading relationship, a single pipeline project is a blip on the radar. But when it comes to the epic six-year impasse between the Harper government and the Obama administration over the Keystone XL pipeline, intended to link the Alberta oil sands to U.S. refineries, it’s a different matter entirely.
President Barack Obama’s decision this week to veto pipeline approval legislation and his increasingly negative tone toward the project have met with undisguised Canadian frustration. The latest display came in a scathing letter from Ambassador Gary Doer to Secretary of State John Kerry, in which he criticized the Environmental Protection Agency (EPA)’s view that the pipeline would contribute to increased greenhouse gas emissions from the oil sands. “One is left with the conclusion that there has been significant distortion and omission to arrive at the EPA’s conclusions,” wrote Doer, lobbing an extraordinary accusation at a regulatory agency supervised by the President.
The question is how far the chill on display in that letter has spread to other parts of the Canada-U.S. relationship.
On some levels, the dispute has been remarkably contained. It has not disrupted the day-to-day operation of an enormous and productive relationship between the two countries that goes on regardless of political noise. “Canada and the United States have been the closest friends and neighbours for more than 100 years and nothing is going to change that,” says former U.S ambassador David Jacobson, adding the Keystone fight has been overblown.
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Military co-operation and border management goes forward, including the conclusion of negotiations over a land-border pre-clearance agreement that is expected this year, aimed at expediting trade and travel. The work of the bilateral Regulatory Cooperation Council has continued on coordinating ways to reduce red tape for businesses trading between the two countries. And in a display of genuine trust, the White House warmly thanked Canada for providing a home for highly confidential talks between the U.S. and Cuba that led to the historic restoration of diplomatic relations. The two countries have pledged close co-operation on intelligence-sharing on the movements of suspected extremists, and are fighting Islamic State together in Syria and Iraq.
“It’s the largest commercial, environmental, most integrated defence-and-security relationship in the world,” says Scotty Greenwood, senior adviser to the Canadian-American Business Council. “That most of the relationship is good news is not considered newsworthy.”
Yet it’s at the highest level that the relationship has not so much erupted in flames but frozen in place. “It’s a really rotten period of stasis,” says Laura Dawson, a cross-border trade consultant in Ottawa. Most notably, Ottawa postponed a North American leaders’ summit that was expected to take place in Canada. It is now unlikely to happen until after the next election. It avoided an awkward photo op in which the Prime Minister would be cast as the unrequited suitor to an aloof President. (Though he would not have been the only one. Stephen Harper was not willing to deliver a major ask for the Mexican president, either—removing a visa requirement imposed in 2009.)
“I think the Harper government has made Keystone XL a proxy for the Canada-U.S. relationship. As long as it’s not resolved, it’s not willing to be proactive or co-operative to move other issues forward,” says Dawson.
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White House spokesman Josh Earnest tried to make light of the postponement. “I assume the weather will be better later in the year than it is in February in Canada,” he told reporters. But the business community was not laughing at the sight of Canada cancelling a meeting with its biggest customers—after all, 70 per cent of Canada’s exports still go to the U.S., and they include much more than diluted bitumen. “In addition to Keystone XL, it’s important to note that we have a big and very positive agenda and it’s important to move it forward,” says Eric Miller, vice-president for policy, innovation and competitiveness at the Canadian Council of Chief Executives. The group had prepared a 39-page report full of recommendations ahead of the leaders’ meeting.
Leaders’ summits do serve a big purpose beyond photo ops: They spur action on ofﬁcial agendas as bureaucracies jump into high gear to produce agreements and outcomes that the leaders can tout. “Whenever you have a meeting of the leaders, you have people scrambling to make progress on the issues,” says Greenwood, a former chief of staff at the U.S. embassy in Ottawa.
Without a meeting, existing work continues, but with less urgency and without a new plan for the future. Now it doesn’t appear that there will be new momentum, at least until the next Canadian election later this year and perhaps even until America picks a new president in November 2016.
“The argument for a long time was that you don’t need Bill Clinton type back-slappery to get something done in the relationship,” says Andrew Finn, program associate at the Canada Institute at the Woodrow Wilson Center in Washington. “But when there is this much frostiness in the relationship, it becomes hard to set big goals and do big things.”
Leaders’ meetings also signal priorities for officials and launch new initiatives. In 2010, Canada did not participate in the leaders’ summit. The U.S. and Mexico met separately and launched a regulatory co-operation initiative between their two countries. “Canada was left out in the cold,” notes Dawson, until months later, when it was able to secure a similar deal with Washington.
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There is also the question of whether other important issues have been eclipsed in Washington by the pipeline fight. For example, Ottawa had been seeking an agreement from the U.S. administration to pay for a $250-million U.S. customs plaza to serve a planned new bridge between Windsor and Detroit, the single busiest trade crossing between the two countries. Canada was already putting up the money to build the bridge, plus highway infrastructure on both sides of the border. In February, Ottawa announced it will pay for the plaza because the U.S. would not. The cost will be recouped by tolls—potentially adding to the cost of using the crossing. Windsor NDP MP Brian Masse says the pipeline overshadowed the bridge in Washington. “The government’s messaging has been pushing for the Keystone deal, but not enough attention has been paid to this file,” he says.
Meanwhile, trade irritants are also piling up, including disputes over protectionist Buy American legislation and a dispute over U.S. country-of-origin labelling requirements for Canadian meat sold in the U.S.
The Keystone saga has pushed some Canadians to re-evaluate the extent of their trade dependence on the U.S.—not only in the energy sector. Chris Sands, a senior fellow at the Hudson Institute, a think tank in Washington, predicts that as the nine-year-old agreement on trade in softwood lumber reaches its expiry date in October, Canadian producers may find their focus turning to the Asian market. “What we are hearing from industry is, ‘Do we really want to have another big battle with the U.S. if Asia will buy all the lumber we can ship them?’ ” he says. A full accounting of the pipeline saga may have to include some missed opportunities among its costs.